Development of Input and Output Prices in Farming
Up to 2000, prices in the agricultural produce markets were on a steady downward course, a trend that was at last and substantially reversed in 2002. Since then prices of key agricultural products have exploded, the consequence of interventions in the farm markets motivated by agricultural and environmental policies. Measures to boost plant-based fuel production played a major role: in the USA more than a third of the maize (corn) harvest goes into the production of ethanol which can be used as a fuel additive. Another factor driving up farm goods prices is the rapid rise of energy costs. Reflecting the high prices of crude oil and natural gas, the production costs of inputs for agriculture have recently soared. Higher prices are likely to reduce supply and, consequent to the growing demand, drive up prices for farming produce. According to estimates by OECD and FAO the upward movement will continue for the next decade, even though the peak prices reached by some products in 2007-08 appear to have been an exception.